Osborne to dash NI’s hopes of decision on corporation tax cut

Northern Ireland's hopes for a decision this week by the British Government to grant it powers to cut corporation taxes are set to be dashed tomorrow by the British chancellor of the exchequer, George Osborne.

Mr Osborne, who will deliver his autumn statement to the House of Commons outlining his tax and spending plans, will offer warm noises about his support for Stormont’s extra powers, but he will hold back from a final decision, say sources.

The timetable for the decision to give power to cut corporation tax rates to match Ireland's 12.5 per cent has slipped repeatedly, and is now being hit by the aftershocks left by the Scottish referendum.

Speaking last Friday, Scotland's newly appointed First Minister Nicola Sturgeon said Scottish eyebrows would be raised if Northern Ireland is given such powers when Scotland has been denied them.

Even though he will not meet hopes of a decision this week, Mr Osborne is expected to give the clearest indication yet that powers over devolution will be transferred if Northern Ireland’s political parties reach agreement in the current round of inter-party talks.

British prime minister David Cameron is due to spend time in Northern Ireland next week, alongside Taoiseach Enda Kenny before Christmas, so a statement from Mr Cameron on this remains a possibility.

However, delays in reaching an agreement could cause new issues, as some Conservatives feel corporation tax should be held in reserve in case it is needed to bring the Democratic Unionist Party onside in any coalition talks required after next May’s UK general election.

Last night, sources in Westminster said the treasury – which has been a reluctant convert to the idea of differential corporation tax rates in the UK – accepts that Northern Ireland is different case to Scotland.

However, the overlap that exists between between Northern Ireland and Scotland has been driven home in the last few days following the Smith Commission’s recommendation that Edinburgh should get full powers over air passenger duties, including short-haul flights.

Northern Ireland was given the freedom to impose lower duties on long-haul flights from January 2-013, but the concession was a minor one since it covers so few flights.

However, the treasury has been inundated with complaints from airports in the north of England on foot of the Smith proposals, with warnings that they could lose out heavily to Scottish airports.

Earlier this month, Mr Cameron said that he “remained committed” to setting out a path for devolving more powers to Stormont in Mr Osborne’s autumn statement, saying that the case made there for lower corporation tax is strong.

“That makes it unique in the United Kingdom so this is different to devolving corporation tax in Wales or Scotland,” he said, adding that Northern Ireland’s public sector is “huge”.

“We need to find ways to regenerate the private sector. What is interesting is that you get this as strongly from Martin McGuinness as you do from Peter Robinson. It is absolutely right for the Government to consider this.”